Patriot reports second quarter 2019 net loss of $1.66 million; Assets Up 5% as loans and deposits expand & SBA lending business grows; Declares quarterly dividend  

8/23, 10:00 PM (Source: GlobeNewswire)

STAMFORD, Conn., Aug. 23, 2019 (GLOBE NEWSWIRE) -- Patriot National Bancorp, Inc. (“Patriot,” “Bancorp” or the “Company”) (NASDAQ: PNBK), the parent company of Patriot Bank, N.A. (the “Bank”), today announced a pre-tax loss of $2.29 million, and net loss of $1.66 million, or $0.42 per fully diluted share for the quarter ended June 30, 2019, even as bank assets, loans, deposits and investment in its retail and SBA lending network continues to expand.

The quarterly loss results from an increase in the provision for loan losses of $2.9 million in the quarter and $3.1 million, year-to-date, largely associated with a $2.3 million charge-off on a single non-performing commercial loan.  This resulted in a year-to-date net loss of $1.33 million, or $0.34 per fully diluted share, as compared to a net income of $2.1 million, or $0.54 per fully diluted shares in the prior year.

The second quarter and full-year results also reflect an increase in operating expenses associated with the organic build-up and expansion of the Bank’s SBA lending business, deposit initiatives, and costs incurred in conjunction with strengthened institutional infrastructure, processes, controls and documentation to address regulatory requirements.

During the quarter, loans receivable increased $23.2 million (up 3%) as new loan originations continued at a strong pace, and total deposits increased $14.7 million (up 2%).  Patriot recognized a gain on the sale of SBA loans of $367,000, compared with $456,000 in the prior quarter and $66,000 in the second quarter of 2018.  The Bank continues to maintain strong capital ratios and earnings which are expected to return to normalized levels in future periods.

Richard Muskus, Patriot’s President stated: “The results for the quarter reflect the impact of a single customer credit problem that we have fully charged off.  We have taken a prudent, proactive approach with this non-performing loan at this point and are moving forward to pursue all available options to obtain a recovery on this credit and the assets it is securitized by.”

In 2019 Patriot instituted enhanced governance policies, procedures and practices, invested in strengthened institutional infrastructure, expanded banking locations into the New Haven and Orange, Connecticut markets and made material advancements in building out its SBA business.  These activities are intended to bolster performance in future quarters by investing in the Bank’s future growth.

Mr. Muskus added: “Patriot’s continued retail location expansion into urban centers across southern Connecticut has now resulted in the Bank having a presence in every major community along the busy I-95 corridor, from downtown Greenwich to downtown New Haven, Connecticut, plus a quite dynamic market in the community of Scarsdale, NY.  Patriot’s investment in repositioning and adding to its now 12-retail and four SBA lending locations, better positions the institution to cater to busy, youthful downtown environments and customers who want banking options that match their active lifestyle.”

Growth in loan originations continued, as evidenced by total loans outstanding reaching $812 million, a 3% increase from the prior quarter and 7% higher than the second quarter of 2018.  Contributions from SBA operations were significant for the last two consecutive quarters and new depositor initiatives in the second half are expected to reduce funding costs and strengthen operating performance.

Patriot also announced today the declaration of its ninth consecutive quarterly dividend of $0.01 per share. The record date for this quarterly dividend will be September 3, 2019, with a dividend payment date of September 13, 2019.

Financial Results

As of June 30, 2019, total assets were $977.8 million, as compared to $953.1 million at March 31, 2019 and $930.2 million at June 30, 2018, for a total asset growth of 5% over the past 12 months.  Net loans receivable totaled $803.3 million, up 3% over $780.7 million at March 31, 2019, and up 7% over $750.8 million at June 30, 2018.  Deposits continued to grow to $767.6 million at June 30, 2019, as compared to $752.8 million at March 31, 2019 and $712.3 million at June 30, 2018.

Net interest income was $6.5 million in the second quarter of 2019, an increase of 3% from the prior quarter, and a decline of 7% from the second quarter of 2018.  For the year-to-date period, the net interest income was $12.9 million, a decrease of 9% from the prior year. The recent decline in net interest income was due to higher deposit costs, the impact of non-performing and reduced rate loans, lower loan fees, and the impact of subordinated debt costs raised in June of 2018.

Net interest margin was 2.93% for the second quarter of 2019, as compared to 2.87% in the prior quarter and 3.34% for the second quarter of 2018. 

The provision for loan losses in the second quarter of 2019 was $2.9 million, as compared to $165,000 in the prior quarter and $50,000 for the second quarter of 2018. The year-to-date provision for loan losses was $3.1 million, as compared to $235,000 for the prior year. The increase in provision for loan losses in the second quarter of 2019 was primarily due to a large provision booked in the quarter associated with a single loan stemming from operating cash flow weaknesses and collateral shortfall.

Non-interest income was $829,000 in the second quarter of 2019, 1% higher than the prior quarter, and 115% higher than the second quarter of 2018. The year-to-date non-interest income was $1.7 million in 2019, 133% higher than the prior year. The increase in non-interest income was primarily due to realized gains on the sale of SBA loans.

Non-interest expense was $6.7 million in the second quarter of 2019, 3% higher than the last quarter, and 13% higher than the second quarter of 2018. The year-to-date non-interest expense was $13.2 million, 13% higher than the prior year.

The increase in 2019 was primarily due to an increase in salaries and benefits associated with the build-up of the SBA lending team, the completion of the acquisition of Prime Bank expanding Patriot’s presence in New Haven County, and increased headcount supporting new deposit initiatives and the expansion of credit, finance and compliance support functions.

The income tax benefit was $632,000 in the second quarter of 2019, represented an effective tax rate of 28%.

As of June 30, 2019, shareholders’ equity was $68.3 million, a decrease of $1.4 million as compared to March 31, 2019.  Patriot’s book value per share decreased to $17.41 at June 30, 2019, as compared to $17.77 at March 31, 2019.

The Bank’s capital ratios continue to be strong, as the Bank maintains its “well capitalized” regulatory status. As of June 30, 2019, the Bank’s Tier 1 leverage ratio was 9.61%, Tier 1 risk-based capital ratio was 10.66% and total risk-based capital ratio was 11.65%.

Patriot Bank is headquartered in Stamford and operates 12 locations: in Scarsdale, NY; and Darien, Fairfield, Greenwich, Milford, Norwalk, Orange, Stamford, Westport, with Express Banking locations at Bridgeport/ Housatonic Community College, downtown New Haven and Trumbull at Westfield Mall.  It also maintains SBA lending offices in Atlanta, Jacksonville, Indianapolis, and Stamford.

About the Company

Founded in 1994, and now celebrating its 25th year, Patriot National Bancorp, Inc. (“Patriot” or “Bancorp”) is the parent holding company of Patriot Bank N.A. (“Bank”), a nationally chartered bank headquartered in Stamford, CT.  Patriot operates with full service branches in Connecticut and New York and provides lending products and services nationally. Patriot’s mission is to serve its local community and nationwide customer base by providing a growing array of banking solutions to meet the needs of individuals and small businesses owners. Patriot places great value in the integrity of its people and how it conducts business.  An emphasis on building strong client relationships and community involvement are cornerstones of our philosophy as we seek to maximize shareholder value.

“Safe Harbor” Statement Under Private Securities Litigation Reform Act of 1995
Certain statements contained in Bancorp’s public statements, including this one, may be forward looking and subject to a variety of risks and uncertainties. These factors include, but are not limited to, (1) changes in prevailing interest rates which would affect the interest earned on Bancorp’s interest earning assets and the interest paid on its interest bearing liabilities, (2) the timing of repricing of Bancorp’s interest earning assets and interest bearing liabilities, (3) the effect of changes in governmental monetary policy, (4) the components of Bancorp’s periodic earnings and assets, (5) the fact that certain of the income recognized by Bancorp in any quarter may not be repeated in future periods, (6) the effect of changes in regulations applicable to Bancorp and the Bank and the conduct of its business, (7) changes in competition among financial service companies, including possible further encroachment of non-banks on services traditionally provided by banks, (8) the ability of competitors that are larger than Bancorp to provide products and services which it is impracticable for Bancorp to provide, (9) the state of the economy and real estate values in Bancorp’s market areas, and the consequent effect on the quality of Bancorp’s loans, (10) recent governmental initiatives that are expected to have a profound effect on the financial services industry and could dramatically change the competitive environment of the Bancorp, (11) other legislative or regulatory changes, including those related to residential mortgages, changes in accounting standards, and Federal Deposit Insurance Corporation (“FDIC”) premiums that may adversely affect Bancorp, (12) the application of generally accepted accounting principles, consistently applied,  (13) the fact that one period of reported results may not be indicative of future periods,  (14)  the state of the economy in the greater New York metropolitan area and its particular effect on Bancorp customers, vendors and communities and other such factors, including risk factors, as may be described in Bancorp’s other filings with the SEC.

Contacts:   
Patriot Bank, N.A.Richard MuskusJoseph PerilloMichael Carrazza
900 Bedford Street PresidentChief Financial OfficerCEO and Chairman
Stamford, CT 06901203-252-5939203-252-5954203-251-8230
www.BankPatriot.com   


PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY     
CONSOLIDATED BALANCE SHEETS     
(Unaudited)     
Dollars in thousandsJune 30,
 2019
 March 31,
 2019
 June 30,
 2018
        
Assets      
Cash and due from banks:     
Noninterest bearing deposits and cash$  5,578  $  6,661  $  4,839 
Interest bearing deposits   45,538     49,971     80,290 
  Total cash and cash equivalents   51,116     56,632     85,129 
Investment securities:      
Available-for-sale securities, at fair value   43,839     40,275     23,982 
Other investments, at cost   4,963     4,963     4,962 
  Total investment securities   48,802     45,238     28,944 
        
Federal Reserve Bank stock, at cost   2,922     2,892     2,564 
Federal Home Loan Bank stock, at cost   4,513     4,513     5,807 
        
Gross loans receivable   811,777     788,536     757,329 
Allowance for loan losses   (8,458)    (7,823)    (6,525)
 Net loans receivable   803,319     780,713     750,804 
        
Loans held for sale   4,283     -     - 
Accrued interest and dividends receivable   3,678     3,621     3,306 
Premises and equipment, net   35,249     35,335     35,715 
Other real estate owned   1,954     2,945     991 
Deferred tax asset, net    11,132     10,357     11,085 
Goodwill   1,107     1,107     2,100 
Core deposit intangible, net   661     680     534 
Other assets   9,031     9,075     3,256 
 Total assets$   977,767   $   953,108   $   930,235  
        
Liabilities     
Deposits:     
 Noninterest bearing deposits$  84,295  $  82,248  $  83,808 
 Interest bearing deposits   683,271     670,573     628,504 
  Total deposits   767,566     752,821     712,312 
        
Federal Home Loan Bank and correspondent bank borrowings   100,000     90,000     110,000 
Senior  notes, net   11,815     11,796     11,740 
Subordinated debt, net   9,738     9,731     9,576 
Junior subordinated debt owed to unconsolidated trust, net   8,098     8,096     8,090 
Note payable   1,291     1,339     1,484 
Advances from borrowers for taxes and insurance   3,239     1,922     2,876 
Accrued expenses and other liabilities   7,730     7,754     5,796 
  Total liabilities   909,477      883,459      861,874  
        
Commitments and Contingencies     
        
Shareholders' equity     
Preferred stock   -     -     - 
Common stock   40     40     40 
Additional paid-in capital   107,198     107,143     106,982 
Accumulated deficit   (37,210)    (35,517)    (36,808)
Treasury stock, at cost   (1,179)    (1,179)    (1,179)
Accumulated other comprehensive loss   (559)    (838)    (674)
  Total shareholders' equity   68,290      69,649      68,361  
        
 Total liabilities and shareholders' equity$   977,767   $   953,108   $   930,235  
        

 

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY      
CONSOLIDATED STATEMENTS OF INCOME (LOSS)        
(Unaudited)Three Months Ended Six Months Ended 
Dollars in thousands, except per share dataJune 30,
2019
 March 31,
2019
 June 30,
2018
 June 30,
2019
 June 30,
2018
            
Interest and Dividend Income         
 Interest and fees on  loans$  10,274  $  9,741 $  9,201 $  20,015  $  17,975
 Interest on investment securities   398     379    291    777     557
 Dividends on investment securities   114     118    128    232     249
 Other interest income   237     333    270    570     421
  Total interest and dividend income   11,023     10,571    9,890    21,594     19,202
            
Interest Expense         
 Interest on deposits   3,533     3,264    1,997    6,797     3,654
 Interest on Federal Home Loan Bank borrowings   426     439    502    865     759
 Interest on senior debt   228     229    228    457     457
 Interest on subordinated debt   279     289    112    568     211
 Interest on note payable and other   8     6    10    14     17
  Total interest expense   4,474     4,227    2,849    8,701     5,098
            
  Net interest income   6,549      6,344     7,041     12,893      14,104
            
Provision for loan losses   2,937     165    50    3,102     235
            
  Net interest income after provision for loan losses   3,612     6,179    6,991    9,791     13,869
            
Non-interest Income         
 Loan application, inspection and processing fees   28     14    12    42     20
 Deposit fees and service charges   116     127    132    243     266
 Gains on sale of loans   367     456    66    823     66
 Rental income   192     130    83    322     167
 Other income   126     95    93    221     189
  Total non-interest income   829      822     386     1,651      708
            
Non-interest Expense         
 Salaries and benefits   3,608     3,184    2,854    6,792     5,623
 Occupancy and equipment expenses   744     917    776    1,661     1,517
 Data processing expenses   361     370    322    731     639
 Professional and other outside services   803     771    457    1,574     1,029
 Project Expenses   (15)    80    592    65     1,115
 Advertising and promotional expenses   77     115    59    192     137
 Loan administration and processing expenses   43     14    30    57     43
 Regulatory assessments   395     315    298    710     550
 Insurance expenses   54     41    53    95     108
 Material and communications   131     134    110    265     223
 Other operating expenses   527     569    410    1,096     768
  Total non-interest expense   6,728      6,510     5,961     13,238      11,752
            
  (Loss) income before income taxes   (2,287)    491    1,416    (1,796)    2,825
            
(Benefit) provision for Income Taxes   (632)    168    380    (464)    724
  Net (loss) income$   (1,655) $   323  $   1,036  $   (1,332) $   2,101
            
  Basic (loss) earnings per share $  (0.42) $  0.08 $  0.27 $  (0.34) $  0.54
  Diluted (loss) earnings per share$  (0.42) $  0.08 $  0.26 $  (0.34) $  0.54
            

 

              
FINANCIAL RATIOS AND OTHER DATA          
              
     Three Months Ended Six Months Ended
     June 30,
 2019
 March 31,
 2019
 June 30,
 2018
 June 30,
 2019
 June 30,
 2018
              
Quarterly Performance Data:          
  Net (loss) income $  (1,655) $  323  $  1,036  $  (1,332) $  2,101 
  Return on average assets  -0.69%  0.14%  0.46%  -0.28%  0.48%
  Return on average equity  -9.44%  1.87%  6.06%  -3.82%  6.21%
  Net interest margin  2.93%  2.87%  3.34%  2.90%  3.44%
  Efficiency ratio  91.19%  90.85%  80.27%  91.02%  79.34%
  Efficiency ratio excluding project costs  91.39%  89.73%  72.30%  90.57%  71.81%
  % increase loans  2.95%  1.05%  4.52%  4.02%  5.24%
  % increase deposits  1.96%  1.28%  8.72%  3.27%  11.76%
              
Asset Quality:          
  Nonaccrual loans $  19,405  $  28,029  $  6,464  $  19,405  $  6,464 
  Other real estate owned $  1,954  $  2,945  $  991  $  1,954  $  991 
  Total nonperforming assets $  21,359  $  30,974  $  7,455  $  21,359  $  7,455 
              
  Nonaccrual loans / loans  2.39%  3.55%  0.85%  2.39%  0.85%
  Nonperforming assets / assets  2.18%  3.25%  0.80%  2.18%  0.80%
  Allowance for loan losses $  8,458  $  7,823  $  6,525  $  8,458  $  6,525 
  Valuation reserve $  1,416  $  1,384  $  1,702  $  1,416  $  1,702 
  Allowance for loan losses with valuation reserve $  9,874  $  9,207  $  8,227  $  9,874  $  8,227 
              
  Allowance for loan losses / loans  1.04%  0.99%  0.86%  1.04%  0.86%
  Allowance / nonaccrual loans  43.59%  27.91%  100.94%  43.59%  100.94%
  Allowance for loan losses and valuation reserve / loans  1.21%  1.17%  1.08%  1.21%  1.08%
  Allowance for loan losses and valuation reserve / nonaccrual loans  50.88%  32.85%  127.27%  50.88%  127.27%
              
  Gross loan charge-offs  $  2,307  $  -   $  13  $  2,307  $  13 
  Gross loan (recoveries)  $  (5) $  (49) $  (3) $  (54) $  (6)
  Net loan charge-offs (recoveries)  $  2,302  $  (49) $  10  $  2,253  $  7 
              
Capital Data and Capital Ratios          
  Book value per share (1) $  17.41  $  17.77  $  17.51  $  17.41  $  17.51 
  Shares outstanding    3,922,610     3,919,610     3,904,578     3,922,610     3,904,578 
Bank Capital Ratios:          
  Leverage ratio  9.61%  9.79%  10.03%  9.61%  10.03%
  Tier 1 capital  10.66%  10.99%  11.05%  10.66%  11.05%
  Total risk based capital  11.65%  11.91%  11.85%  11.65%  11.85%
              
(1)  Book value per share represents shareholders' equity divided by outstanding shares.      
              

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